December 17, 2017

Colorado Court of Appeals: Petition to Vacate Appraisal Award Properly Denied

The Colorado Court of Appeals issued its opinion in Owners Insurance Co. v. Dakota Station II Condominium Association, Inc. on Thursday, July 27, 2017.

Appraisal Award in Insurance Dispute—Impartial Appraiser Standard.

Owners Insurance Company (Owners) issued a property damage policy to Dakota Station II Condominium Association, Inc. (Dakota). Wind and hail storms damaged buildings in the residential community owned by Dakota. The losses were combined into a single insurance claim, but there was a dispute about the total amount of damages. The parties invoked the insurance policy’s appraisal provision. Each party selected an appraiser. They submitted proposed awards of different amounts and then nominated a neutral umpire as provided in the insurance policy. The final award of about $3 million was a mix of four damage estimates from Owners’ appraiser, Burns, and two estimates form Dakota’s appraiser, Haber. Burns refused to sign the final determination of costs. Haber and the umpire agreed and signed the award, and Owners paid Dakota.

Dakota then sued Owners in federal court for breach of contract and unreasonable delay in paying insurance benefits. During discovery, Owners learned several facts about Haber that it alleged demonstrated she was not an impartial appraiser. Owners filed a petition to vacate the appraisal award under C.R.S. § 13-22-223. Following a hearing, the trial court denied the petition.

On appeal, Owners argued that the trial court erred by not analyzing the insurance policy’s appraisal dispute provision, as well as the conduct and hiring of Haber, under the Colorado Uniform Arbitration Act’s (CUAA) standards for a neutral arbitrator in C.R.S. § 13-22-211(2). The Colorado Court of Appeals found no error because the policy did not incorporate CUAA’s standards and the parties’ stipulation that CUAA applied did not specifically state whether the appraisers were to be held to the statutory standard.

Owners then argued that Haber was not an “impartial appraiser” under the insurance policy. This term was not defined in the policy and has not been construed by a Colorado appellate court. The trial court interpreted it as an appraiser who applies appraisal principles with fairness, good faith, and lack of bias. The court agreed that this was the correct reading of the policy provision and its intent. The trial court’s application of this standard was supported by the record.

The judgment was affirmed.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: District Court Lacked Jurisdiction to Confirm Arbitration Award Where Arbitrator Died

The Colorado Court of Appeals issued its opinion in In re Marriage of Roth on Thursday, April 6, 2017.

Subject Matter Jurisdiction—Death of Arbitrator During Pendency of Arbitration.

The parties agreed to arbitrate the permanent orders issues in their dissolution of marriage. The agreement provided that the Colorado Uniform Arbitration Act (CUAA) governed the proceedings; the arbitrator would reserve jurisdiction for 20 days after issuing an award to allow the parties to seek clarification, correction, or modification of the award; and if jurisdiction was reserved on an issue, the arbitrator would hear it unless he was unavailable. The arbitrator issued an award, and both parties submitted timely requests for modification and clarification of the award. During the process of submitting these requests, the arbitrator died. Five days later, wife moved in district court to appoint a replacement arbitrator under C.R.S. § 13-22-215(5). A week later husband moved to confirm the arbitrator’s award under C.R.S. § 13-22-222. The trial court found that wife was essentially seeking to relitigate the permanent orders, and it denied her motion and granted husband’s motion to confirm the award and entered a dissolution decree incorporating the award.

On appeal, wife argued that under the CUAA, the district court lacked subject matter jurisdiction to confirm the arbitration award while the parties’ requests to modify or correct it were pending before the arbitrator. She contended that upon the death of the arbitrator, the court had subject matter jurisdiction only to appoint a replacement arbitrator. Under the CUAA, a valid and enforceable arbitration agreement divests the district court of jurisdiction on all matters submitted to arbitration pending the conclusion of the arbitration. Here, due to the timely requests for modification or correction of the award, the arbitration proceedings had not concluded at the death of the arbitrator and subject matter jurisdiction to confirm the award was not in the district court. Under the CUAA, the district court only had subject matter jurisdiction to appoint a replacement arbitrator to complete the proceedings.

Wife further contended that the district court erred by denying her motion to appoint a replacement arbitrator. Because it is undisputed that the parties’ chosen arbitrator could not act, the district court was required to appoint a replacement arbitrator.

The district court’s judgment confirming the arbitration award was vacated, its order denying wife’s motion to appoint a replacement arbitrator was reversed, and the case was remanded to appoint a replacement arbitrator to complete the arbitration proceedings.

Summary provided courtesy of The Colorado Lawyer.